Didn't see this one coming... (GM wants more)

[Speed_Racer]

Sorry, but we all knew this would happen when they first went to Washington with their hands out. I just didn't think they'd be back so quickly. Wait, maybe I did. All I can see is that GM is trying to threaten us once again, but is lacking in concrete plans and goals.

Anyways, the story. My "favorite parts" are marked in italics.



Report: GM to say, 'more aid or bankruptcy'

SAN FRANCISCO (MarketWatch) - General Motors Corp. will offer the government the choice of giving it billions more in bailout money or seeing it file for bankruptcy when it presents a restructuring plan next week, according to a report published Saturday.

The online edition of The Wall Street Journal, citing unnamed sources, said the competing choices present a dilemma for the Obama administration, which may fear seeing the industrial icon carmaker fall into bankruptcy and cut more jobs if it's refused more aid.

The government has already committed $13.4 billion to GM as part of a federally-funded bailout. The automaker is expected to include its call for more funds in a restructuring plan it's required to submit to the Treasury Department by Tuesday, though the company isn't expected to include a dollar amount, according to the Wall Street Journal report.

However, Treasury Department officials believe GM needs at least $5 billion more in loans to keep operating beyond the first quarter, according to the report.

While filing for bankruptcy may be the best way for GM to cut costs and revitalize, if the company chooses that option it may include politically unpalatable moves to sell off assets and cut more jobs.
GM and other automakers have been slammed by a drop-off in car sales as the recession has worsened. GM and Chrysler LLC have asked for and received government bailout money, while Ford Motor Co., like its peers, has also seen sales fall sharply in recent months, but has not asked for aid.
Chrysler is also expected to submit a restructuring plan on Tuesday.

House Speaker Nancy Pelosi and Financial Services Chairman Barney Frank sent a letter Friday to GM Chief Executive Rick Wagoner and Chrysler Chief Executive Robert Nardelli reminding them that the White House expects to hear about restructuring plans that include a willingness "to make tough decisions," but which also will "protect American jobs in the future."

GM said earlier this week that it plans to cut some 3,400 jobs, or 12% of its U.S. salaried workforce. Shares of the automaker have fallen nearly 15% in the past three months. The shares closed Friday down more than 5% at $2.50. See related story on GM's job cut announcement.
Also this week, Toyota Motor Corp., the largest automaker in the world by sales, said it plans to cut back production in North America and offer buyouts to employees.

GM believes that if it is forced to seek bankruptcy, it would need government funds for debtor-in-possession financing, because such funding wouldn't be available from private sources, according to the Wall Street Journal report.

In addition, the automaker may also seek permission to extend its March 31 deadline for some restructuring actions "by at least several months."

While GM's Wagoner previously opposed filing for bankruptcy protection, the CEO in early December hired bankruptcy lawyers and advisers to prepare a "contingency plan," the report said.
Chrysler, which has received $4 billion in federal loans, is attempting to have Italian automaker Fiat take a 35% stake in the company in exchange for providing technology for small and mid-size cars that Chrysler would build and sell.

Chrysler is controlled by private equity firm Cerberus Capital Management LP. Chrysler is expected to request $3 billion in additional loans from the government, and it has recently been asking dealers to order more vehicles in order to give it enough revenue to keep going through the end of March, according to the report.

John Letzing is a MarketWatch reporter based in San Francisco.
http://www.marketwatch.com/news/story/gm-say-more-aid-bankruptcy/story.aspx?guid={D2483F8A-638A-4A2B-9EC2-428EE920D5E5}&dist=msr_1#comments

[S204STi]

Brilliant.

[Submariner]

Epic win

[Vinsanity]

While filing for bankruptcy may be the best way for GM to cut costs and revitalize, if the company chooses that option it may include politically unpalatable moves to sell off assets and cut more jobs.

It can't be any less palatable than running to the federal government for more taxpayer money

[TBR]

House Speaker Nancy Pelosi and Financial Services Chairman Barney Frank sent a letter Friday to GM Chief Executive Rick Wagoner and Chrysler Chief Executive Robert Nardelli reminding them that the White House expects to hear about restructuring plans that include a willingness "to make tough decisions," but which also will "protect American jobs in the future."

As if either of those idiots knows enough about the auto industry, the economy, and business in general to actually judge such a plan in any effective way.

[3.0L V6]

As if either of those idiots knows enough about the auto industry, the economy, and business in general to actually judge such a plan in any effective way.

Unfortunately, politics has little to do with expertise and much to do with image.

[hotrodalex]

Let them file for bankruptcy.

[cozmik]

At this point, it's pretty clean GM needs bankruptcy. They need to be able to shed and restructure everything. At this point, the gov is just paying for all the things GM doesn't need, want, nor afford. GM needs to be about half the size it is now. As painful as it may be, and as many jobs as it will have to cut, it's what needs to be done, and it's going to happen eventually. GM won't go away after the bankruptcy, they'll just be where they should be.

[SVT666]

At this point, it's pretty clean GM needs bankruptcy. They need to be able to shed and restructure everything. At this point, the gov is just paying for all the things GM doesn't need, want, nor afford. GM needs to be about half the size it is now. As painful as it may be, and as many jobs as it will have to cut, it's what needs to be done, and it's going to happen eventually. GM won't go away after the bankruptcy, they'll just be where they should be.

Bankruptcy could very well be the final nail in the coffin.  I don't know a single person who would buy a car from a car company that was in Chapter 11.  People want to know that there will be a warranty, etc.

[dazzleman]

Bankruptcy could very well be the final nail in the coffin.  I don't know a single person who would buy a car from a car company that was in Chapter 11.  People want to know that there will be a warranty, etc.

Will they buy a car from them now, with bankruptcy such a likely possibility?  How much security does a GM buyer have now?  I wonder if they already have all the disadvantages of bankruptcy, without any of the advantages or protections it might afford.

[the Teuton]

GM has no reputation to tarnish.  This whole mess is very public and very damaging for the company.

They need to trim the fat and get it over with.  Then, someone needs to scold the government for giving out billions of dollars of our money to these companies for delaying problems rather than actually facing them.

[Nethead]

Reuters adds its two cents worth, basically the same story with little cheer for stockholders and GM vehicle owners:

GM considering Chapter 11 filing, new company-WSJ
Sat Feb 14, 2009 5:04pm GMT

"General Motors Corp (GM.N: Quote, Profile, Research), nearing a Tuesday deadline to present a viability plan to the U.S. government, is considering as one option a Chapter 11 bankruptcy filing that would create a new company, the Wall Street Journal said in its Saturday edition.

"One plan includes a Chapter 11 filing that would assemble all of GM's viable assets, including some U.S. brands and international operations, into a new company," the newspaper said. "The undesirable assets would be liquidated or sold under protection of a bankruptcy court. Contracts with bondholders, unions, dealers and suppliers would also be reworked."

Citing "people familiar with the matter," the story said that GM could also ask for additional government funds to stave off a bankruptcy filing.

GM declined to comment, the story said.

General Motors and Chrysler LLC face a Tuesday deadline to file restructuring plans to the government in exchange for receiving $17.4 billion in federal loans.

Automakers have struggled as U.S. auto sales have tumbled amid a recessionary economy. U.S. auto sales in January tumbled to a 27-year low.

GM has been in talks with bondholders and the United Auto Workers union to get an agreement on a restructuring that would wipe out about $28 billion in debt for the auto maker, sources have told Reuters. However, it appears unlikely a deal could be reached by the Tuesday deadline, they said.

GM has already announced plans to cut 10,000 salaried workers worldwide, or 14 percent of its staff, impose pay cuts for most remaining white-collar U.S. workers and has offered buyouts to its 62,000 U.S. workers represented by the UAW.

In addition, it is trying to sell its Hummer SUV and Swedish Saab brands and is reviewing the status of its Saturn brand. (Editing by Eric Walsh)"

[the Teuton]

Overhead is what's killing GM.  Their new plan, once again, almost completely skirts the issue.  Amazing.

[dazzleman]

Overhead is what's killing GM.  Their new plan, once again, almost completely skirts the issue.  Amazing.

GM will continue to skirt the issue as long as they can get government money.  Government bailouts enable bad practices to continue, create zombie companies that are a waste of scarce capital resources, and simply delay the inevitable.

[the Teuton]

I also like how they're trying to spin all of their bad assets into another company and sell it off separately.  While they're at it, they should just throw a whole bunch of accounts into a separate company and brush it under the rug. 

That's almost what Enron did back in the day with branches acting as holdings groups.  Argh!

The problems don't lie in one tainted set of assets versus another that is seemingly a lot more viable.  Everything is intermingled.  You can't get rid of half a problem. 

If this were the 1950s or 1960s when each brand was run separately, this might be viable.  But to say that Saab and Hummer (as well as Saturn) are the root of the problem is to overlook the problem.  As it is, Saturn no longer has any original products in its lineup, so it's not like it's really the overlying issue.

Once again, this whole thing is skirting the main issues at hand:  overhead costs.

Hummer is extremely profitable and very low-maintenance, so it's not like it's that big of an issue.  They just want an excuse to please legislators and get rid of something that tarnishes their image as a clean company.  It's understandable, but they shouldn't paint the picture differently than it is.  The Hummer represents the 1990s SUV excess that plagued all of the manufacturers.  It was excess not unlike Cadillac's gaudy fins that stuck out 20 feet in the air.

Saturn is just a mismanaged failure.  Same with Saab.  GM's two best brands have never been treated right.

But they really aren't the problems at all, and I think it's terrible that they don't seem to think they aren't.

GM, Ford, and Chrysler need to form a pact and eliminate the UAW and then renegotiate all of the contracts privately if it's legal.  They need to consolidate assets, like buy back Delphi, GMAC, etc., and become more vertically integrated again.  And they need to do it for less than what they are doing it for now.

[hotrodalex]

I'm so glad I don't own a modern GM product.

[cozmik]

The talks with the Swedish Government seem to have fallen apart from what I've read, so if GM goes Chapter 11, Saab will probably get dissolved. That's how it looks at least. Chapter 11 may be the best option for GM. People already aren't buying cars. And everyone already knows GM is fucked, Chapter 11 is just a formality at this point.

[Tave]

GM should have been man enough to do it last year instead of running to its mommy like a kid who was pushed on the playground. Shame on us for giving them money, and shame on them asking.

[r0tor]

bailing out GM permanently would probably cost a fraction of the Stimulus package and actually save more jobs and or create more jobs then the bastard of a bill will ever do..... oh well

[TBR]

bailing out GM permanently would probably cost a fraction of the Stimulus package and actually save more jobs and or create more jobs then the bastard of a bill will ever do..... oh well

I disagree, $13.4 billion didn't last them for 4 months, how long do you think $850 billion will last taking into account that a massive restructuring is needed for them to be a viable company again?

Not saying that the stimulus bill is a good way to spend our money though.

[Tave]

Let them file for bankruptcy.

No one is stopping them.

[Catman]

All this bullshit really has drawn me to Ford.  Their stuff has great quality and the styling looks better all the time.  Waiting to see the new Explorer....

[CALL_911]

All this bullshit really has drawn me to Ford.  Their stuff has great quality and the styling looks better all the time.  Waiting to see the new Explorer....

I don't know, I still think GM has the best products of the Big 3.

[Catman]

I don't know, I still think GM has the best products of the Big 3.

Yet Ford isn't looking for handouts.....

[YO]

is there a 2nd gen Aztek in the near future...??

[MX793]

Yet Ford isn't looking for handouts.....

Ford's relatively smaller size helps.  GM has 8 brands in the US alone (plus Opel/Vauxhall, Holden and Daewoo overseas).  At their peak, Ford only had 7.5 brands, and they've since sold 3 of them and sold off much of their stake in Mazda.

[CALL_911]

Yet Ford isn't looking for handouts.....

Truth.

[r0tor]

fear not... B.O. already gave them a few billion more

[cozmik]

Yet Ford isn't looking for handouts.....

That's cause they mortgaged everything a year or two back when things were good and they still were about to go under. The banks own (or well, it's been put up as collateral) everything, including the Ford name itself. Turns out it actually ended up being a good thing they were the first to almost go under. They just did when credit was being handed out like lollipops at the bank.

[TBR]

That's cause they mortgaged everything a year or two back when things were good and they still were about to go under. The banks own (or well, it's been put up as collateral) everything, including the Ford name itself. Turns out it actually ended up being a good thing they were the first to almost go under. They just did when credit was being handed out like lollipops at the bank.

And that demonstrates the importance of upper management and is why it is absolutely ludicrous to suggest that Mullally should be making $0.